9 Ways a Good Credit Score Can Help Your Wallet

1. Mortgages

Most Americans are aware that good credit entitles them to the best mortgage rates. What they may not realize is just how much money a stellar score can save them.

According to FICO’s mortgage calculator, a person with a score between 760 and 850 can expect to pay $1,345 a month for a $300,000 30-year fixed rate home loan. A person with a score between 620 and 639 can expect to pay $1,624 for the same mortgage. (The interest rates at play here are 3.485% and 5.074%, respectively.) This works out to an extra $100,440 saved over the life of the loan.

The added savings aren’t the only perk on the table. A high credit score can save you tons of time as well since “you would not be shopping through a variety of lenders” for great rates, says Mary Ellen Nicol, Certified Housing Counselor with the nonprofit credit counseling organization CredAbility.

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2. Auto Loans

Equally lucrative savings are on the table when it comes to finding funding for that new car you’re looking to buy. By FICO’s estimates, a person with a score between 720 and 850 can expect to pay $734 a month after taking out a $25,000 36-month auto loan. A person with a score between 500 and 589 will pay $894 a month for the same loan. This is a $5,760 difference in costs overall.

The calculations are based off of 3.59% and 17.183% interest rate respectively, but keep in mind, there are also many 0% financing offers available at dealerships that those with close-to-perfect credit scores can often net.

“The interest rate is going to lower the overall cost of the car,” Nicol says, which, in turn, can affect how long you’ll be paying off the purchase. “You can finance for four years versus six,” she adds.

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3. Cell Phone Plans

Many cell phone providers have taken to pulling credit when a customer comes in and applies for one of their plans. In these instances, a stellar score isn’t going to net big discounts. Instead, a subpar score may lead a provider to turn down the business.

“They want to offer you the service with the expectation that you will pay your bills,” Nicol says. “If you don’t have a good score, they may not offer you the account.”

And, if you can’t score an account with an affordable provider, you may have to settle for a more expensive alternative.

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4. Insurance Policies

Stellar credit can also come in handy when you’re shopping around for various insurance policies. “There’s a special score FICO has developed for insurers that uses credit history as a prediction of your likelihood of filing a claim,” Sprauve says.

This score is calculated differently than the score consumers are used to seeing, but there are similarities between the two since they are both based on what appears on your credit report.

You can find more information on insurance scores on FICO’s website.

Ultimately, however, “if you have a good credit score, you can get a discount on insurance,” Sprauve says.

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5. Leases

There is also a version of the credit report used by landlords to help determine whether a lease applicant is going to make good on their rent, Sprauve says. This means renters with a stellar payment history have a better chance of getting that apartment of their dreams, while those with subpar scores may have to settle for smaller digs that cost more.

“You can have [an apartment] picked out at a certain price point and not be accepted in terms of your credit score,” Nicol says. “Then you need to go looking for more options.”

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6. Small Biz Expenses

Qualifying for prime real estate via a good credit score is perhaps even more important for small business owners since a good location can bring in sales.

“It’s tied to desirability,” Nicol says, meaning the score can help boost one applicant over another when all other factors are created equal.

Having prime credit also plays a big role in obtaining a small business loan, whether it is from the Small Business Association, a bank or private lender. In these instances, a perfect credit score isn’t just necessary to qualifying for the best interest rates, though that can certainly save you a bundle. Instead, it can play a crucial role in getting the loan to being with. Small business lending has been particularly tight since the economic downturn.

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7. An Education

Having good credit can also qualify you for a lower interest rate on a student loan.

“A lot of people who are unemployed are looking for financing to go back to school,” Nicol says, and a top-tier score can make this endeavor much less expensive.

Keep in mind, for younger students who have yet to build a credit profile, this is often an instance where someone else’s bad credit can hurt you.

“If they’re applying with a co-signer, they’re going to look at that person’s credit,” Nicol says. In most cases, this co-signer is the individual’s parent or guardian.  You can find more specifics about this particular type of financing in MainStreet’s round up of 10 Student Loan Terms Explained.

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8. Credit Cards

The savings associated with qualifying for the best credit card products on the market are two-fold. For starters, a score of 750 or more can net you a card with a low annual percentage rate, which can spare you some dollars if you ever have to revolve a balance. (These premium  APRs typically fall between 7.25% and 10%.)

Additionally, “you can qualify for cards with higher lines of credit and more potential perks,” Sprauve says, such as a stellar rewards program that earns cash back, points or frequent flier miles which can be applied to later purchases.

Subprime credit products, on the other hand, rarely carry rewards, have much higher interest rates and also feature bigger fees since the cardholder is considered more a risk when it comes to paying back their bills.

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9. Job Prospects

In addition to prime real estate, a good credit score can help you obtain a premium position in the workforce. Though the practice has been  hotly contested over the last few years, many employers will do a credit check as part of their application process. Laws prohibit employs from actually seeing your credit score, but they are able to look at a version of your credit report (which is used to calculate a score.)

Similar to rental agreements, this credit report isn’t going to be the biggest factor in deciding what person gets hired, but it can bump one qualified candidate over another with a similar resume.

“If they’re seeing things that look chaotic on a credit report, they may pick the more financially stable individual,” Nicol says.

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